Forbes Story: What ExxonMobil’s Merger With Pioneer Means For U.S. Shale

NEW YORK, NEW YORK - SEPTEMBER 18: Host Dana Perino with Chevron CEO Mike Wirth visits "America's Newsroom" with hosts Bill Hemmer and Dana Perino at Fox News Channel Studios on September 18, 2023 in New York City. (Photo by Roy Rochlin/Getty Images)

[Note: This story is also published at Forbes.com]

Whenever a merger like this week’s deal between U.S. major ExxonMobilXOM and Permian Basin pure-play independent Pioneer Natural ResourcesPXD is announced, the analyst community is going to produce an array of competing views about whether the transaction is wise for either or both companies. Certainly, that has been the case this week.

Will Chevron now pursue a similar deal to try to keep pace with ExxonMobil’s new scope and scale? What about ConocoPhillips and Oxy? Will the Biden Federal Trade Commission try to delay ExxonMobil’s deal from closing? These and other questions are all rising to the surface now in the wake of Tuesday night’s announcement.

The markets themselves have been non-committal on the matter, as ExxonMobil stock dropped by about 3% in the wake of Tuesday night’s announcement while Pioneer stock rose by about 1% Wednesday. It is interesting to note that Pioneer shares have not risen to the $253 valuation the deal places on it as of Thursday’s opening, though not really determinative. Obviously, many factors are impacting energy stock prices at the moment - including a new war in the Middle East - of which this merger is just one.

Analyst views on the deal appear to be generally positive. Andrew Dittmar, Director at energy consultancy Enverus, said in an email that “The offer represents an 18% premium to the undisturbed share price and a 9% premium to the 30-day volume weighted average price.”

Dittmar noted the merger’s price implies a value of more than $4 million for each of Pioneer’s drilling locations, a premium over previous Permian Basin-focused deals. “But,” he adds, “Pioneer represents a nearly unique and high-quality asset and Exxon is justified in paying a premium to secure the Permian as a foundation of its production portfolio.”